If you are a small business owner, chances are that most of your personal net worth is tied up in your business. So even if selling your company is not on your radar anytime soon, there will come a day you will want to cash out and sell it at the best possible price.
Even if you plan to sell to partners or transfer to family members, there are some things you should be doing to ensure your own investment is protected:
Build an investment as you build your company. Anyone who eventually buys your company will be looking for investment value, so pay attention to how you can add value to your business. This starts with having a diversified management team, so the business does not just depend on you and there are seasoned managers a new owner can count on. Building good customer relationships so you have a recurring source of revenue makes your company more valuable as well.
Get a valuation of your business. Hire a professional to provide a thorough valuation of your business at least a year prior to sale. This will give you a time to shore up any areas that need improvement.
Document your business plans and processes. A well-run company runs on written plans and processes. These are necessary not only to demonstrate good management practices, but also crucial to protect you from litigation. Be sure you have all agreements with employees, customers and vendors in writing and that employment rules are codified in an employee handbook.
Implement effective tax strategies. Be sure your business structure provides you with the maximum tax benefits and asset protection strategies. If a large percentage of your own net worth is in the company, you need to protect that by operating as an LLC or corporation.
We can help you protect and grow your company through effective risk management. Contact a Creative Business Lawyer® to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit today.